This analysis will examine some of these points in more detail, particularly by looking at drilling and completion cost drivers in Paloma’s Louisiana Haynesville position.
Asset Position
The assets are located largely in Caddo and De Soto Parishes in Louisiana, with the rest scattered throughout the rest of the Haynesville counties in the state. The company indicated NMA of 57,000 acres prior to sale. Goodrich reported only 32,000 net WI acres at acquisition, so somehow in that time the admittedly strong land department headed by Mark Gabrisch at Paloma has wheeled and dealed pretty aggressively. Many of the existing Paloma wells were originally drilled by either Chesapeake or BP/Petrohawk, so those seem to be the main trade partners. The eastern Caddo/Bossier block and the Bienville block were originally BP positions. In the map we bifurcate between last known acreage position (Q2 2021), and the current estimate.
As with most Louisiana core Haynesville positions, Paloma’s is heavily developed
Largely, remaining inventory is concentrated in the western half of Caddo and De Soto, which also happens to be where the best productivity lies. Though there are scattered sections with little-to-no development, for the most part Citadel will be drilling the 1-2 last available wells in the section, so there will likely be performance degradation.
The bulk of the acreage is outside of the Bossier fairway, so do not expect much in the way of lagniappe there.
Outside of the Bossier fairway, unless of course you are SWN trying to justify overpaying for Indigo!
Activity
The Paloma era on this asset base began in late December 2021. Development ramped up afterwards as a new operator with access to capital came in. It also helps that gas prices increased dramatically just after acquisition. Unfortunately, prices turned south as production rose and Paloma largely stopped the drill program, outside of 7 wells across 2 adjacent pads in October of 2023. Hopefully, Paloma secured hedges before the decline in prices. Welcome to operating in the US gas market.
Paloma’s Haynesville volumes dropped by over half from peak in a little over a year once low prices forced the drilling program to be halted.
Well Design
Paloma has followed a similar well design to offset operators, though lateral lengths trend shorter than the peer group. Proppant loading is highest in the peer group though does not differ much either. It still is a bit astounding that operators are shoving that much sand down there.
Paloma has tended to be on the lower end of basin average for lateral lengths, though the 2023 development was a company record.
From a lateral perspective, Paloma did push up to 2.5 mile laterals in 2023. Costs have yet to be released as the wells were completed in late 2024 so we will see what the final tally is. At least one of the wells needed to be sidetracked (the Green 7&30 17-14HC 2-ALT), So the average may end up above historical norms.
| Surface |
~2200 ft |
10.75 in 40.5# |
13.5 in |
| Intermediate |
~10,500 ft |
7.625 in 29.7# |
9.875 in |
| Production |
TD |
5.5 in 23#/5 in 18# |
6.75 in |
| Tubing |
~10,000 |
2.375 in |
|
Casing design is basically the standard for Haynesville horizontals in Louisiana, with surface down to ~2,200 ft, an Intermediate string to the top of the curve, followed by a tapered production string.
Cost Benchmarking
Outside of the wells completed in Q3 of 2024 (should be released shortly), AFE Leaks has full cost coverage of Paloma’s Haynesville program. Across these 39 wells, Paloma averaged approximately $1,947/Completed Lateral Ft, which feels high. Though, it should be noted these are 1.5-mile locations, as opposed to the more standardized 2-mile locations most operators favor today. Given how developed the Louisiana side of the Haynesville is, it becomes more difficult to find long lateral locations and underscores the importance of a strong land department.
On a per-well basis, costs tend to fall in the middle of the peer group, but this is misleading due to the lateral length difference. From a drilling perspective, Support Services and Cement is on the low end, while Fuel/Water/Power and Mud & Additives are on the high end, which may reflect classification differences between operators. Casing costs do appear on the high-end. Stimulation costs do appear high, though analysis shows that spend is on par with other operators when adjusted for completion size.
Paloma wells tend to have higher costs than competitors.
Other basins (like the Delaware), show a similar trend of increasing cost-per-ft as laterals push above 2.5 miles. Potential cost savings of longer laterals are hampered by a higher chance of well problems. Combined with declining per-ft productivity, ultra-long laterals don’t appear to be the best answer on a standalone-well basis, though savings from lease and facility optimization may change the answer slightly.
What is driving the higher-than-average spend?
Paloma drilling costs tend to outpace completion/facilities, though stimulation is still the highest single component.
39 Wells: 7,530 ft lateral / 11,400ft TVD / Proppant Loading of 5,067 lb/ft
Completion Design
Paloma has had the largest completion designs on a proppant-per-ft basis in the basin, as shown in the well design section. Surely this would lead to some of the outspend?
Despite above average proppant loading, Paloma stimulation/overall completion costs are not the driver for above-average costs
Well, clearly that is not the issue. Despite the peer-leading proppant-loads, Paloma is middle of the pack when it comes to overall completion spend. The next highest cost component overall is Casing spend.
Hopefully, Post Oak-backed Quantent can reduce Ensight IV’s insanely high costs.
Casing Design
Cost of casing appears in-line with other operators, though overall casing spend is top of the peer group
Casing costs generally lag HRC by ~1 year, so it does appear there was some relief moving into 2024. Prices have risen in the last month as the effects of tariffs begin to roll through; it remains to be seen where it settles, but this could provide some cost pressure moving into 2026.
Paloma has the highest casing costs across the peer group for wells spud in 2022
Paloma does outspend in overall casing costs, which is likely driving a good portion of the above-average spend. Overall cost and cost/ft of measured depth are at the top of the peer group, while overall weight is not, but still high as well. This implies that the procurement of pipe possibly occurred later than the peer group as post-acquisition Paloma ramped up drilling aggressively, intercepting the up-cycle in steel costs. Otherwise, Citadel should look to revisit the current casing supplier.
Other
Beyond the casing spend, most of Paloma’s cost components appear largely in-line with peer averages. Some variances (like Mud outspend) are not necessarily structural, and likely reflect a combination of inherited Goodrich practices, fewer drilling cycles under the Paloma brand, and a limited ability to optimize through repeat development.
Conclusion
Paloma’s Haynesville program, though ultimately derailed by the dip in gas prices, delivered a solid private equity return on a relatively quick turnaround. While average capex appears elevated — particularly when normalized on a $/ft basis — much of this is driven by casing design, shorter lateral lengths, and potential timing of procurement during the steel inflation cycle. Completion design, often the usual suspect in overspending, appears disciplined and largely in line with peers on both unit and total costs.
Strategically, Paloma’s land and operations team grew the position substantially in under two years — no small feat in a heavily leased and developed portion of the basin — which played a key role in driving the eventual exit. If Citadel can leverage scale and strip out operational inefficiencies, the asset could serve as a solid initial entry into the Haynesville. That said, it likely needs bolt-on acquisitions to fully support Citadel’s broader gas trading strategy.
